Good critical thinking on bernard madoff’s investment advisor fraud

Madoff was the founder of Bernard L. Madoff Investment Securities, which was, at one point of time, a largest market-maker at NASDAQ(Weiner 3). He was also a philanthropist and a member in board for various nonprofit organizations. It made him a credible person. He was a man of great social standing and had close ties with Washington’s lawmakers and people in Securities Industry. He did not approach his investors directly. Moreover his scheme was open only for the affluent class. It made the scheme desirable and sought after among the investors. His scheme had a very high investment His investors were mainly the Jews from well to do families and the Jewish organizations. J. Ezra Merkin, a prominent member of the Jewish community, was a middle man for Madoff. Merkin attracted a lot of Jewish investors (Wilhelm). His investors list included big names like Mortimer Zuckerman, Steven Spielberg, Harry Kaufman among many others. This gave people a belief that their funds were safe.
The other important fact about Madoff’s scheme was that it did not offer high returns to the investors unlike other ponzi schemes. It offered consistent returns to the investors over a very long period of time. Whenever the investors wanted their money back, they got back the money within a few days. In fact, Swiss bank believed that his scheme was a leading scheme in the market with Madoff having a hold over the market (Schwartz). He knew very well his customers’ mindset and took every measure that no one suspects him. It was revealed that he used a typewriter and letterheads to produce backdated documents. He used computer programs which got live feed from Wall Street and portrayed as if he was trading with European firms. But in reality it was just exchanging keystrokes. He had a huge network of people who advertised for his funds. He directly did not promote his business. The high incentives he gave for promoting his scheme worked well in his favor. All these factors created a great trust among the people which came to a crashing end on December 11th 2008 with the arrest of Bernard Madoff, thereby exposing the greatest Ponzi scheme ever.

Works Cited

Weiner, Eric J. What Goes Up: The Uncensored History of Modern Wall Street as Told by the
Bankers, Brokers, CEOs, and Scoundrels Who Made It Happen. New York: Little,
Brown. 2005. Print.
Wilhelm, William J., and Joseph D. Downing. Information Markets: What Businesses Can Learn
Schwartz, Nelson D. “” Madoff Dealings Tarnish a Private Swiss Bank”” The New York
Times 23 Dec. 2008. Print.